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Lifetime ISA Offers a Welcome Boost For First-Time Buyers

View profile for Emma Gilroy
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The news that from today (6th April 2018) a Lifetime ISA (LISA) can be used to help buy a first time residential home will be welcomed by many who are keen to get on the housing ladder.

Effectively, the scheme, available to anyone under 40, means first time buyers can potentially accrue £1,000 for free, on top of their own savings, as long as they use their LISA savings to buy a home.

Under the scheme, the Government will add £1 to every £4 saved, up to a limit of £1,000 each tax year, until the investor turn 50 years old.

However, the following criteria apply, to help ensure the scheme isn’t abused:

  • The property must cost £450,000 or less
  • The property must be bought at least 12 months after opening the Lifetime ISA
  • A conveyancer must be instructed to act on the purchase, and the purchase must be carried out with the assistance of a mortgage

A Lifetime ISA investor can buy jointly with others – the other party does not have to be a first time purchaser as well - regardless of how they are funding the purchase

Under the LISA scheme, up to £4,000 a year of these savings will be eligible for the 25 percent bonus. More can be added to your pot, but this won’t be eligible for a Government contribution.

The bonus will be paid annually for the first year, and then every month from the 2018/2019 tax year, so you, as the saver, benefit from compound growth. 

The LISA scheme allowances sit within your overall ISA limit of £20,000 in 2017/18 and 2018/2019 for all payments into any kind of ISA.

The investor can also decide whether to sit on these savings until they are 60, by which time they can spend them in any way the investor wishes.

While withdrawals on any ISAs are tax-free, in the case of a LISA, if the investor wants to spend this money on anything other than their first property and if they are also under the age of 60, a 25 percent penalty will apply. This penalty takes effect from April 2018.

The LISA applies in the same way as other ISAs in that the investor is free to hold multiple lifetime ISAs at one time. However, an investor can only open and pay into one lifetime ISA in each tax year. 

Money already saved in existing ISAs can be transferred. Any money that is transferred from previous years’ ISAs will not affect your overall ISA limit for that year. 

For property advice, please contact our specialist Residential Conveyancing Solicitors in:

  • Swansea: 01792 773773
  • Cardiff: 02920 225472
  • Carmarthen: 01267 234022
  • Caerphilly: 02920 860628
  • Cowbridge: 01446 771742
  • Haverfordwest: 01437 764723
  • Fishguard: 01348 873671

Or request a quote for your conveyancing here.